Money

Monetary theory

The relation between money and what it will buy has always been a central issue of monetary theory. Crucial to understanding this matter is the distinction economists make between face (or nominal) values and real values—that is, between official values stated in current dollars, pesos, pounds, yen, euros, and so on and the same quantities adjusted by the price level. The latter is a “real” value, meaning the real quantity of goods, services, and assets that money will buy. This can also be understood as the real purchasing power of the money stock.